REG - tinyBuild, Inc. - Preliminary Results and Directorate Change
29/03/2023 07:00
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RNS Number : 5403U tinyBuild, Inc. 29 March 2023
29 March 2023
tinyBuild, Inc
("tinyBuild" or the "Company")
Preliminary Unaudited Results for the year ended 31 December 2022
Directorate change
tinyBuild (AIM:TBLD), a premium video games publisher and developer with
global operations, is pleased to announce its unaudited results for the twelve
months ended 31 December 2022.
Financial Summary (unaudited):
(12 months ended December, $'000) 2021 2022 change
Revenue 52,153 63,295 21%
Operating profit 12,532 15,923 27%
Profit before tax 12,524 15,930 27%
Basic earnings per share ($ cent) 4.3 5.7 32%
Operating cash flow 13,290 19,259 45%
Net cash, at 31 December 48,832 26,496 -46%
Adj. EBITDA(1) 22,239 24,355 10%
Adj. EBITDA margin 42.6% 38.5%
(1) Excludes share-based compensation expenses, and exceptional items (e.g.
IPO cost, Ukraine/ Russia relocation) includes amortisation of Development
costs
Financial highlights:
● Revenue grew 21% to $63.3m (2021: $52.2m), reflecting a solid
performance in the last part of the year from new titles including Hello
Neighbor 2, Tinykin, Asterigos, Spiderheck and back catalogue sales.
● Adj. EBITDA increased to $24.4m (2021: $22.2m) up 10% y-o-y, while
margin decreased to 38.5% (2021: 42.6%) primarily due to the consolidation of
Versus Evil and Red Cerberus acquired in November 2021.
● Operating profit increased by 27% to $15.9m (2021: $12.5m), thanks
to lower share-based payment expenses and exceptional costs. It includes a
$11.1m write-off of the intangibles from the Versus Evil/ Red Cerberus
acquisition broadly offset by a reduction in deferred earn out payment.
● Profit before tax grew by 27% to $15.9m and basic EPS grew by 32%
to 5.7c, reflecting a lower tax charge.
● Operating cash flow increased 45% to $19.3m (2021: $13.3m), as a
result of revenue growth and lower exceptional charges. Excluding $2m one-off
items in 2022 (2021: $5.5m), operating cash flow increased by 13% to $21.3m
(2021: $18.8m).
● Net cash as of 31 December 2022 was $26.5m compared to $48.8m as
at 31 December 2021, reflecting increased investments on development costs
($35.8m in 2022, vs $15.1m in 2021) and $4.2m cash payment for M&A in the
year.
Operational highlights:
● In 2022, tinyBuild released a number of new titles, including
Tinykin, SpiderHeck, Asterigos and Hello Neighbor 2, plus version 1.0 of
Cartel Tycoon, Despot's Game and Potion Craft, and a number of platform
launches which generated growth across the entire portfolio of over 80 titles.
● Notably, in 2022 the Company launched three new games with a
development budget of over $1m that achieved an average return of 1.9x before
the end of the year demonstrating the Company's ability to successfully bring
larger-budget games to market across multiple platforms and providing a solid
base for future releases.
● Contribution to revenues from first/second-party games decreased
marginally to 77% of Gaming revenues (2021: 81%), primarily due to the
consolidation of Versus Evil's 3rd party portfolio.
● Robust back catalogue sales represented 80% of total revenue
(2021: 83%), demonstrating the Company's ability to extend the life cycle of
games, while adding new titles.
● Three acquihires completed (Demagic, Scythe and Konfa Games) plus
the acquisition of Bossa's IP (Surgeon Simulation franchise, I am Bread, I am
Fish) for a total upfront cash consideration of $4.2m.
● Successfully relocated over a hundred people following the
invasion of Ukraine, and set up a new studio in Belgrade, Serbia.
● Expanded the size of the revolving credit facility with Bank of
America from $25m to $35m and extended the maturity date to three years to
maintain the flexibility to fund potential M&A in the most effective way.
The facility is currently undrawn.
Directorate change:
● After taking paternity leave in 2022, Luke Burtis, Chief Operating
Officer (COO) and Board Member, has decided to resign from his board position
and management role with immediate effect to spend more time with his family.
Luke has been a valuable member of tinyBuild, and his contributions to
strategy and operations in the early years have been invaluable. The Board of
tinyBuild would like to express its gratitude to Luke for his contributions
during his tenure and wishes him all the best in his future endeavours.
● As the Company continues to move towards the more decentralised
structure set out at the Capital Markets Day in June 2022, the
responsibilities of the COO role have been distributed among a wider group of
decision-makers, giving individuals and teams more autonomy and accountability
for their areas of responsibility. Therefore, the Company does not currently
intend to appoint a replacement.
Employee Benefit Trust:
● Since the Company's pre-close trading update released on 23
January 2023, the Employee Benefit Trust has purchased an additional 419,200
ordinary shares on the market and now holds a total of 573,500 ordinary
shares. The EBT was set up in 2022 for the benefit of current and future
employees and will continue to act independently of the Company to satisfy
potential future option exercises of vested options granted. The maximum
amount of the loan made available to the EBT at any time shall be capped at
$10m.
Post Period End highlights:
● Acquisition of NotGames, a UK-based studio, for an upfront cash
consideration of $1.5m plus max deferred consideration of $4.2m, subject to
stretched financial targets. NotGames is the developer studio of Not For
Broadcast, a critically acclaimed full motion propaganda simulator. Not for
Broadcast has a 94% positive review score on Steam and it has been nominated
for the Game Developer Conference awards and BAFTA Game awards.
● Recent announcements include the release date for I am Future, a
brand new VR title in the Hello Neighbor franchise (Hello Neighbor: Search and
Rescue), the VR version and the first DLC for Not For Broadcast, and the first
announcement for Punch Club 2: Fast Forward, among others.
● Hello Neighbor 2 users' review score continues to improve on Steam
("very positive" in the past 30 days). The roadmap for 2023 will focus on
improving gameplay features: better AI, expansion of the Neighborhood with new
unique characters, more complex investigations and more lore exploration.
● The first two episodes of Hello Neighbor animated series have
already collected over 1m viewers each. Season 1 will consist of 18 episodes,
each 10-14 minutes long, all released during 2023. tinyBuild teamed up with
Man of Action, the creators of Ben 10, to develop a new world that is at the
same time coherent with and wider than the narrative already developed in the
games, books and graphic novels.
Outlook
● The pipeline for 2023 and beyond is strong and includes a number
of larger budget games alongside continuous investment in the catalogue
including updates, DLCs and console launches.
● The timing of these investments and of new releases means that the
net cash position is expected to dip lower in the first half of 2023 and to
improve in the second half of 2023 to rise above $26.5m by the end of December
2023, excluding potential unannounced M&A.
● The implication of the conflict in Ukraine and the evolving
macroeconomic situation impose caution and vigilance and tinyBuild continues
to carefully assess the position of its staff, its exposure in terms of
revenues and any other factor that may have an impact on the business.
● All considered, the Board remains confident the Company is on
track to deliver results at least in line with expectations, plus accretive
acquisitions.
Alex Nichiporchik, Chief Executive Officer of tinyBuild, commented:
"Last year was possibly the hardest test of our strategy and it validated the
importance of investing in long-term, sustainable franchises and the people
behind them. We faced unprecedented challenges, all while integrating
acquisitions in different geographies and moving to a decentralised approach
to keep the company agile at a larger scale."
"Our highly diversified portfolio of games continues to perform well as we
push deeper into a wider variety of platforms and technologies. Our strong
back catalogue performance supports an acceleration in organic investments
while M&A multiples adapt to the changed environment. Finally, we see
early signs of success of our cross-media product and we will continue to
experiment with the aim to add additional revenue streams to our core
business."
"On a personal note, I want to thank Luke for his enormous contribution to the
Company and for his precious advice on so many occasions. As a team, we
support Luke's decision to focus on his family and wish him all the best in
the future."
Enquiries:
tinyBuild, Inc investorrelations@tinybuild.com (mailto:investorrelations@tinybuild.com)
Alex Nichiporchik - Chief Executive Officer and co-founder
Antonio Jose Assenza - Chief Financial Officer
Giasone (Jaz) Salati - Head of M&A and IR
Berenberg (Nominated Adviser and Joint Broker) +44 (0)20 3207 7800
Ben Wright, Mark Whitmore, Ciaran Walsh, Milo Bonser
Numis (Joint Broker) +44 (0)20 7260 1000
Hugo Rubinstein, Tejas Padalkar
SEC Newgate (Financial PR) tinybuild@secnewgate.co.uk
Robin Tozer, Harry Handyside, Molly Gretton +44 (0)7540 106366
About tinyBuild:
Founded in 2013, tinyBuild (AIM: TBLD) is a global video games publisher and
developer, with a catalogue of more than 70 premium titles across different
genres. tinyBuild's strategy is to focus on its own intellectual property (IP)
to build multi-game and multimedia franchises, in partnership with developers.
tinyBuild is headquartered in the USA with operations stretching across the
Americas and Europe. The Group's broad geographical footprint enables the
Company to source high-potential IP, access cost-effective development
resources, and build a loyal customer base through its innovative grassroots
marketing.
tinyBuild was admitted to AIM, a market by the London Stock Exchange, in March
2021.
For further information, visit: www.tinybuildinvestors.com
(http://www.tinybuildinvestors.com) .
Chairman's Statement
Building our portfolio, one IP at a time
The video games industry, much like its film industry cousin, is a hit-driven
business. Once in a blue moon, a single title can boost a company or group's
revenue overnight by adding a few surprising zeroes to its bottom line, and
the pursuit of such an IP is the goal of most teams within game studios.
Relying on a single hit, though, is not sound strategy: as a creative product,
there is no blueprint for engineering a runaway success. If such a thing were
possible, we would have companies consistently churning out billion-dollar
franchises; the reality is that these come along quite rarely even for the
most sophisticated and experienced creators. Counting on a single hit to
materialise in order to meet expectations is not a sustainable strategy.
For tinyBuild's strategy, the hit-driven characteristic of our industry
translates to operating with a portfolio approach. The larger our portfolio
grows, the more resilience and predictability is built into our forecasts and
operations. Overperforming titles make up for those falling short of the
estimations, and on aggregate we are able to predict quite accurately our
yearly revenues while still leaving the door open to the eventual runaway hit,
the ultimate aim of every game project in production at the Group's studios.
The alternative of hyping and overreliance on a particular title, especially
prior to its litmus test at launch, introduces volatility that, in our view,
is incompatible with market expectations and our ambitions for growing the
tinyBuild group at a sustainable and consistent rate. Instead, we choose to
invest our energy in our teams by continually improving their skills,
capabilities and confidence, therefore increasing the chances of their
creative output beating their own ambitions and, eventually, resulting in an
unexpected hit that could translate in a significant upside.
In the following pages you will see this very dynamic at play with the fourth
quarter 2022 delivering our most successful quarter ever, against a disruptive
background that saw teams and products relocating from countries at war in the
middle of their live projects.
The investments made in the teams, a direct result of our people-first
approach, lays down the tracks for our new GaaS (Game as a Service) launches
in the years ahead. This represents a marked change of pace towards the future
that sees the tinyBuild studios gradually leveraging its industry-leading
community expertise to the benefit of organically growing nascent live service
games. By expanding the portfolio with these new service titles, whose nature
is such that their launch is just the start of their growth curve, we further
our goal of increasing predictable and resilient revenues.
We closed FY'22 with record revenue and EBITDA, keenly focused on continuing
the growth trajectory in the years ahead with a rapidly expanding portfolio of
games, one successful IP at a time. The mindset of limiting downside with a
broad base of titles, while creating the conditions for the upside provided by
a hit, is the shared approach of the entire tinyBuild team. Our mission is
clear, and its execution is ever improving: make more, better games our
players fall in love with.
Henrique Olifiers
Non-Executive Chairman
CHIEF EXECUTIVE'S REVIEW
We recently crossed the two year mark since tinyBuild went public. On March 9,
2021 we listed on the London Stock Exchange. It is time to reflect on why we
listed, and how it's going so far.
tinyBuild's mission is to build long-lasting, sustainable franchises across
multiple media formats. We know video games. It's a great business. Our
ultimate goal is to create franchises within video games, and take them to
other media - beyond interactive entertainment, so that they outlive us as a
generation.
WHY WE WENT PUBLIC
We considered listing in the US. Other exchanges looked even more interesting
in 2020. Specifically, the London Stock Exchange already had a very well
educated investor group and listed peers with comparable business models, if
different strategies. In the US, you inevitably get compared to the big AAA
companies and mobile juggernauts which have very different prospects to ours.
I also wanted to make sure we have a mechanism to align incentives in the
Company. Having actual "shares" that are tradable achieves this. IPO it was.
I started my career playing video games professionally, and ended up in game
production. No formal education. Founded tinyBuild while living in the
Netherlands before we became a US company. Then I moved to the US. We have
people scattered all over the world, and we all have a passion for playing and
making video games.
DEALING WITH THE UPS AND DOWNS
It's easy to go insane when looking at your share price live on screen. I see
many people obsessing over it. Our shares have been volatile and it means
that the share price can move up or down by 5% or even 10% in a day, but that
volatility doesn't alter the fundamental value of the business.
With that in mind, the market has definitely gone down over the past half
year, but it doesn't impact our operations or long term vision. We dealt with
relocating over 100 people in a time of war, so we can manage a turbulent
share price. The key is to not make short term decisions that may impact your
long term growth potential. Every decision we make needs to get us
incrementally closer to the long term goal.
From a personal perspective, running a public company is an amazing
experience, one which I wouldn't necessarily recommend to everybody. People
who know me may note this peculiar character trait of being able to focus on a
specific issue at the time. It's important to know what you can impact, and
spend your energy on that. Obsessing over situations you can't change is the
biggest waste of time (the only finite resource we have) for any management
team.
DECENTRALISED STRUCTURE
As of right now we operate a dozen internal studios working on our own
franchises. The first catalyst was the acquisition of the development team of
Hello Neighbor, and from there we started learning and building how to operate
studios. We learned the hard way that it's better to decentralise as much as
possible. You can't just go from being a publisher to suddenly running
studios. It's a gradual process where you build up muscle, experience and
discipline.
At one point just as we went public, it became clear that growth brings
bottlenecks. Especially when it comes through rapid hiring. I've seen this
happen in companies experiencing rapid headcount growth and didn't want to end
up in the same trap. So, we started decentralising.
It's a painful process where instead of having departments and department
leads (directors/heads/ managers), you build multi-disciplinary teams that
focus on the product itself. Instead of having 50 people spread across 5
different disciplines (i.e. marketing, production, community management, etc)
we have groups of 3-7 people working on specific products - and only those
products. Instead of having product-centric decisions go through a director
(bottleneck), they are decided within the product group itself. It's
definitely a journey to get to such a structure, as you need to be extremely
confident in your people. Most experienced professionals will have grown up in
a traditional department structure, and the natural career growth is to become
a manager - we have the opposite, everyone is hands on, including myself, and
able to assist team mates. This is how tinyBuild was when we were 5 people,
and that magic scaled to where we are now.
A simplified way to look at our structure is this: we have a supporting team
at the top to keep the rain out, and supporting team below to make sure the
company has a solid foundation with product groups working directly on
products from both internal and external studios. The goal is to give as much
ownership as possible to people actually working on products.
What happens when you have the right people is that everyone feels involved.
Everyone has direct ownership. It's an empowering feeling. Alongside these
product groups you build supporting layers. HR, development services
(localisation/ QA), finance, contracts management -- those exist as supporting
layers for the product groups.
This structure allowed us to start delivering games everywhere all at once. To
both consoles/ PC, and mobile. If you want to create a franchise, it needs to
be present on as many relevant platforms as possible. Any developer that's
launched games to multiple platforms understand the major challenges involved.
STEPPING UP INVESTMENTS
Investing in long-term, sustainable franchises and the people behind them was
validated as crucial during the unprecedented challenges we faced last year.
In 2022, we accomplished a remarkable feat by shipping three titles in a row
with a budget of $1 million or more and by the end of 2022, we had already
achieved an average return of 1.9x.
We proved our publishing team is capable of handling larger projects,
delivering them across platforms, on time, quality and budget. A great
achievement in normal times, an outstanding achievement during the year we
relocated over 100 people in a time of war.
We are now ready to step up investments and take advantage of opportunities
created by an uncertain macroeconomic environment. We did not plan for the
cost of living crisis or geopolitical instability, it is more like being
prepared and ready for the unknown. One example is when we set up the $35m
revolving credit facility with Bank of America, shortly after the IPO. Now we
have an extra level of safety and more flexibility if required.
Counting on a publishing team that can deliver big games across various
platforms such as PC, console, mobile, and VR, means that we can now
confidently invest in games with a budget $1-5m and 2-5 year development cycle
when peers are forced to retrench and the most interesting opportunities
become more affordable.
In 2022 we found that M&A multiples were often anchored to unrealistic
expectations, while we were having much more productive discussion with
development studios working on new high-potential games. That's why we stepped
away from some potential acquisitions and preferred to invest more directly.
Every week the executive team sits down and reviews all options. Every week we
approach capital allocation decisions as if it was the first time, with no
sacred cows and the determination to uncover new opportunities that have the
right ingredients, both in terms of financial upside and strategic fit. This
is not a linear process and sometimes we go for months without finding
anything exciting, sometimes we can make decisions on many projects at once.
In 2023 we will continue to invest for the long term with the same
down-to-earth approach, expecting a minimum 2x return on our investments and
looking at the whole spectrum of options ahead of us. As the founder and
tinyBuild shareholder, I can't see a better way to create value long term.
CROSS MEDIA
Another part of our strategy since before the IPO days, is our focus on cross
media. I believe we are working on a truly groundbreaking TV Series for Hello
Neighbor. With the writers behind Ben 10, Sonic, and Big Hero Six - we have an
all-stars team and a division dedicated to bringing games to linear media, and
to merchandise. We've proven we can produce books with over 4 million novels
sold, now it's time to prove we can produce TV content of the highest quality.
We could go the easy way about it and ask one of the big platforms to fund the
project, leaving us a thin profit margin and possibly having a say in how we
have to go about it. Instead we preferred to make the investment to deliver
what we see as a very innovative product, that has value both as a standalone
TV series and as a multiplier of our video game franchises.
We are excited about the developments of what we call a "canon commercial".
It's a canonically relevant piece of audiovisual content such as cartoons that
has the potential to drive the best marketing possible. Just as cartoons were
used to sell toys in the 90s, we can now use them to sell games.
In 2022 we launched the first two episodes of Hello Neighbor animated series
inside the games, an absolute first in terms of marketing innovation -
creating an immensely positive community response, and fueling the continued
hype for the Hello Neighbor franchise. We have the whole first season being
completed in 2023, unveiling secrets that Hello Neighbor players have been
waiting for a long time for. And more to go after that with a low-risk,
EBITDA-neutral approach that allows us to experiment without betting the house
on anything specific.
THERE ARE NO SHORTCUTS
I've been working full-time since I was 14 years old, and I am turning 35 this
summer. Playing games professionally, writing about the industry, marketing
and producing games. What you learn is that the world is unfair, and you
should focus on what you can impact and work on your skills. What you
shouldn't do is take shortcuts. Every couple of years there's a new shiny
thing that you don't fully understand why it's useful, and people are trying
to sell you on it. Don't let the hype influence your decision making.
There are no shortcuts in life or business. Anything you do requires hard
work, dedication, and love for what you do. Going public was a way to allow us
to continue growing, innovating, and following our course and it's only the
beginning of the journey. I feel lucky for being able to experience this in an
accelerated way. Usually it takes companies years to go public, and to
experience huge swings in the price. We listed in under a year, and within the
past 2 years have seen insane highs and lows. It's humbling. It's an
experience, it's levelling up. And I'm happy we said no to most "hyped"
opportunities, such as going into social games a decade ago, all the
crypto-esque scams, selling JPGs, and always stayed course.
OPTIMISTIC OUTLOOK
The market has been challenging. Still, I'm optimistic about the industry in
general. In 2023 we will be seeing plenty of groundbreaking AAA titles,
alongside standout AA/indie games that really set new trends. Our goal is to
make sure we deliver high quality games on as many platforms as possible, and
pave the way for them to become franchises. I can't wait until we start
revealing our upcoming products in 2023 and beyond.
Alex Nichiprochik
CEO and Founder
Chief Financial Officer's Review
2022 saw a resilient financial performance for tinyBuild, both in terms of
back catalogue and in terms of new games, in a challenging geopolitical and
macroeconomic environment. Nine new titles were released, and the company
closed the year with a portfolio of over 80 games. In addition, tinyBuild grew
with four acquisitions, including Bossa Studio's IP.
Revenue
tinyBuild saw total revenues increase 21% (2021: 39%) from $52.2m to $63.3m,
including the consolidation of Versus Evil and Red Cerberus, acquired in
November 2021. tinyBuild's revenue is generated mainly from game sales on
various platforms and a variety of platform deals (e.g. subscription programs,
development partnerships and exclusivity agreements). Events include primarily
revenues from DevGAMM, our game developers conference operator, which
demonstrated incredible resilience in the face of the invasion of Ukraine.
Revenue generated from own-IP (1st and 2nd party games) decreased slightly to
77% of gaming revenues (2021: 81%), as a result of the consolidation of
primarily third-party publisher Versus Evil. Our strategy is to continue to
expand our own-IP portfolio, which will support underlying adjusted EBITDA
margin growth in the long term.
Adjusted EBITDA and Operating Profit
Adjusted EBITDA increased from $22.2m to $24.4m in 2022, a growth of 10%,
largely driven by solid organic performance and the consolidation of
inherently lower margin Versus Evil and Red Cerberus. The ongoing
decentralisation process and the continuous shift toward own-IP support
further margin increase in the medium terms, though the progression will
depend on the revenue mix.
Adjusted EBITDA is presented net of amortisation of development costs,
excluding share-based compensation expenses, amortisation of purchased IP and
other intangible assets and exceptional costs, giving a clear picture of the
underlying business progression. Development costs for own IP are now
amortised over a 36 month period, in line with industry standards, to reflect
the extended life-cycle of the games.
Operating profit increased 27% to $15.9m (2021: $12.5m) mostly as a result of
lower exceptional charges (e.g. relocation costs relating to the war in
Ukraine) and lower share-based compensation costs that dropped for the second
year in a row.
Exceptional charges for 2022 include $1.7m for staff relocation following the
invasion of Ukraine, where the situation remains uncertain and management
cannot exclude further charges in the future. The $11.1m writedown relating to
Versus Evil and Red Cerberus is offset by the decrease in contingent
consideration ($11.1m other operating profit), resulting in no material impact
on operating profit.
Interest income and taxation
Interest income was $0.1m (2021: $0.0m) and taxation increased to $4.4m (2021:
$4.3m), mainly due to changes in deferred tax due to new US tax legislation
coming into effect.
Financial Position
In 2022, the net cash position decreased to $26.5m from $48.8m, mainly driven
by larger investments in new games including a small number of larger budget
titles. Capitalised software development costs, increased from $15.1m to
$35.8m in 2022 reflecting a larger number of organic opportunities and
investments in the upcoming pipeline releases.
Following the customary annual test, goodwill has been reduced from $13.2m to
$3.7m, reflecting a downward revision for the carrying value for Versus Evil
and Red Cerberus, a decrease which is offset by an equal decline in contingent
consideration. IP has increased from $18.6m in 2021 to $23.1m in 2022
primarily due to identifiable assets from the acquisition of Demagic, Bossa IP
and Konfa Games.
tinyBuild currently still holds a $35m revolving credit line with Bank of
America, which remains undrawn.
Cash Flow
Cash flows from operating activities increased from $13.3m to $19.3m thanks to
lower exceptional and tax charges more than offsetting increased marketing
costs and the adverse impact of timing differences. Cash generated from
operations include an add back of $1.7m for share based payments in the
current year (2021: $2.5m)
Acquihires and Acquisitions
In 2022 tinyBuild acquihired three studios and Bossa's IP for a total upfront
cash payment of $4.2m. In April 2022, tinyBuild acquihired DeMagic, a porting
studio based in Serbia. In August 2022, tinyBuild acquihired Konga Games
(Despot's Game) and Bossa IP (Surgeon Simulator franchise, I am Bread and I am
Fish), a related party transaction. In December 2022, tinyBuild acquihired the
studio Scythe (Happy's Humble Burger Farm).
Events after the reporting date
In March 2023, after taking paternity leave in 2022, Luke Burtis, Chief
Operating Officer (COO) and Board Member, announced his resignation with
immediate effect to spend more time with his family. As the Company continues
to move towards the more decentralised structure set out at the Capital
Markets Day in June 2022, the responsibilities of the COO role have been
distributed among a wider group of decision-makers, giving individuals and
teams more autonomy and accountability for their areas of responsibility.
Therefore, the Company does not currently intend to appoint a replacement.
In March 2023 tinyBuild acquired NotGames (Not for Broadcast), for an upfront
cash consideration of $1.5m plus max deferred consideration of $4.2m, subject
to stretched financial targets. NotGames is the developer studio of Not For
Broadcast, a critically acclaimed full motion propaganda simulator.
TINYBUILD INC.
CONSOLIDATED UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
Unaudited
Note $'000 $'000
Revenue 63,295 52,153
Cost of sales (20,687) (18,112)
Gross profit 42,608 34,041
Administrative expenses:
- General administrative expenses (34,403) (14,469)
- Share-based payment expenses (1,726) (2,452)
- Exceptional costs (inc. IPO and Ukraine invasion) (1,678) (4,588)
Total administrative expenses (37,807) (21,509)
Other operating income 11,122 -
Operating profit 15,923 12,532
Finance costs (73) (8)
Finance income 80 -
Profit before tax 15,930 12,524
Income tax expense (4,417) (4,281)
Profit for the year
11,513 8,243
Other comprehensive income net of taxation
Exchange differences on translation of foreign operations - may be 7 -
reclassified to profit and loss
Total comprehensive income for the year 11,520 8,243
Attributable to:
Owners of the parent company 11,545 8,268
Non-controlling interests (32) (25)
11,513 8,243
Basic earnings per share ($) 5 0.057 0.043
Diluted earnings per share ($) 5 0.056 0.042
Adjusted EBITDA* 6 24,355 22,239
*Adjusted EBITDA is a non-GAAP measure and is defined as earnings before
interest, tax, depreciation, amortisation (excluding amortisation of
capitalised software development costs), share-based payments expenses and
other significant one-off expenses.
TINYBUILD INC.
CONSOLIDATED UNAUDITED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER
2022
2022 2021
Unaudited
ASSETS Note $'000 $'000
Non-current assets
Intangible assets 7 80,384 57,156
Property, plant and equipment:
- owned assets 795 41
- right-of-use assets 341 528
Trade and other receivables 406 266
Total non-current assets 81,926 57,991
Current assets
Trade and other receivables 25,382 15,569
Cash and cash equivalents 26,496 48,832
Total current assets 51,878 64,401
TOTAL ASSETS 133,804 122,392
EQUITY AND LIABILITIES
Equity
Share capital 204 203
Share premium 65,593 63,546
Warrant reserve 1,920 1,920
Translation reserve 7 -
Retained earnings 43,910 30,639
Equity attributable to owners of the parent company 111,634 96,308
Non-controlling interest (43) 137
Total equity 111,591 96,445
LIABILITIES
Non-current liabilities
Lease liabilities 97 277
Contingent consideration - 6,336
Deferred tax liabilities 1,800 2,345
Total non-current liabilities 1,897 8,958
Current liabilities
Trade and other payables 20,046 9,290
Contingent consideration - 4,793
Contract liabilities - 2,645
Lease liabilities 270 261
Total current liabilities 20,316 16,989
Total liabilities 22,213 25,947
TOTAL EQUITY AND LIABILITIES 133,804 122,392
TINYBUILD INC.
CONSOLIDATED UNAUDITED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Share capital Share premium Warrant reserve Translation reserve Retained Total equity attributable to owners of the parent company Non-controlling interest Total
earnings equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January 2022 203 63,546 1,920 - 30,639 96,308 137 96,445
Profit/(loss) for the year - - - - 11,545 11,545 (32) 11,513
Other comprehensive income:
Foreign exchange differences on the translation of foreign operations - - - 7 - 7 - 7
Total comprehensive income for the year - - - 7 11,545 11,552 (32) 11,520
Transactions with owners in their capacity as owners:
Dividends paid to non-controlling interests - - - - - - (148) (148)
Issue of shares on exercise of options - 28 - - - 28 - 28
Issue of shares, net of transaction costs 1 2,019 - - - 2,020 - 2,020
Share-based payment charge - - - - 1,726 1,726 - 1,726
Total transactions with owners 1 2,047 - - 1,726 3,774 (148) 3,626
Balance at 31 December 2022 204 65,593 1,920 7 43,910 111,634 (43) 111,591
TINYBUILD INC.
CONSOLIDATED UNAUDITED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
Share capital Share premium Warrant reserve Translation reserve Retained Total equity attributable to owners of the parent company Non-controlling interest Total
earnings equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 January 2021 1 18,674 - - 19,919 38,594 162 38,756
Profit/(loss) and total comprehensive income for the year - - - - 8,268 8,268 (25) 8,243
Transactions with owners in their capacity as owners:
Share split 178 (178) - - - - - -
Issue of shares, net of transaction costs 23 46,816 - - - 46,839 - 46,839
Issue of shares on exercise of options 1 154 - - - 155 - 155
Issue of warrants - (1,920) 1,920 - - - - -
Share-based payments - - - - 2,452 2,452 - 2,452
Total transactions with owners 202 44,872 1,920 - 2,452 49,446 - 49,446
Balance at 31 December 2021 203 63,546 1,920 - 30,639 96,308 137 96,445
TINYBUILD INC.
CONSOLIDATED UNAUDITED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
Unaudited
$'000 $'000
Cash flows from operating activities
Cash generated from operations 19,259 13,290
Net cash generated by operating activities 19,259 13,290
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired - (11,784)
Software development (35,780) (15,085)
Purchase of intellectual property (4,150) (10,832)
Proceeds on disposal of intangible assets - 45
Purchase of property, plant and equipment (1,235) -
Net cash used in investing activities (41,165) (37,656)
Cash flows from financing activities
Repayment of borrowings - (13)
Proceeds from issuance of shares, net of transaction costs
- 46,839
Proceeds from exercise of share options 28 155
Payment of principal portion of lease liabilities (310) (96)
Dividends paid to non-controlling interests (148) -
Net cash generated by/(used in) financing activities (430) 46,885
Cash and cash equivalents
Net (decrease)/increase in the year (22,336) 22,519
At 1 January 48,832 26,313
At 31 December 26,496 48,832
TINYBUILD INC.
NOTES TO THE CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1 GENERAL INFORMATION
TinyBuild Inc. ("the Company") is a private company limited by shares, and is
registered, domiciled and incorporated in Delaware, USA. The address of the
registered office is 1100 Bellevue Way NE, STE 8A #317, Bellevue, WA 98004,
United States.
The Group ("the Group") consists of TinyBuild Inc. and all of its
subsidiaries. The Group's principal activity is that of an indie video game
publisher and developer.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The preliminary results for the year ended 31 December 2022 are unaudited. The
financial information set out in this announcement does not constitute the
Group's financial statements for the year ended 31 December 2022.
This financial information should be read in conjunction with the financial
statements of the Group for the year ended 31 December 2021 (the "prior year
financial statements"), which are available from the Registrar of Companies.
Accounting policies
The Group's principal accounting policies used in preparing this information
are as stated on pages 42 to 49 of the prior year financial statements. There
has been no significant change to any accounting policy from the date of the
prior year financial statements.
3 SEGMENTAL REPORTING
IFRS 8 Operating Segments requires that operating segments be identified on
the basis of internal reporting and decision-making. The Group identifies
operating segments based on internal management reporting that is regularly
reported to and reviewed by the Board of directors, which is identified as the
chief operating decision maker. Management information is reported as one
operating segment, being revenue from self-published franchises and other
revenue streams such as royalties, licensing, development and events.
Whilst the chief operating decision maker considers there to be only one
segment, the Company's portfolio of games is split between those based on IP
owned by the Group and IP owned by a third party and hence to aid the readers
understanding of our results, the split of revenue from these two categories
are shown below.
Game and merchandise royalties Year ended Year ended
31 December 2022 31 December 2021
Unaudited Audited
$'000 $'000
Owned IP 26,915 30,640
Third-party IP 13,105 9,231
40,020 39,871
Three customers were responsible for approximately 67% of the Group's revenues
(2021: three - 67%).
The Group has seven (2021: six) right-of-use assets located overseas with a
carrying value of $342,000 (2021: $528,000) and tangible assets located
overseas with a carrying value of $623,000 (2021: $nil). All other non-current
assets are located in the US.
4 REVENUE
An analysis of the Group's revenue is as follows: Year ended Year ended
31 December 2022 31 December 2021
Unaudited Audited
$'000 $'000
Game and merchandise royalties 40,020 39,871
Development services 22,744 11,477
Events 531 805
63,295 52,153
5 EARNINGS PER SHARE
The Group reports basic and diluted earnings per common share. Basic earnings
per share is calculated by dividing the profit attributable to common
shareholders of the Company by the weighted average number of common shares
outstanding during the period.
Diluted earnings per share is determined by adjusting the profit attributable
to common shareholders by the weighted average number of common shares
outstanding, taking into account the effects of all potential dilutive common
shares, including options and warrants to the extent that they are deemed to
be issued for no consideration in accordance with IAS 33.
Year ended Year ended
31 December 2022 31 December 2021
Unaudited Audited
$'000 $'000
Total comprehensive income attributable to the owners of the company 11,545
8,268
Weighted average number of shares 203,421,359 191,241,890
Basic earnings per share ($) 0.057 0.043
11,545
Total comprehensive income attributable to the owners of the company 8,268
Weighted average number of shares 203,421,359 191,241,890
Dilutive effect of share options 1,948,232 2,484,523
Dilutive effect of warrants 149,130 149,130
Dilutive effect of restricted stock awards 954,654 954,654
Weighted average number of diluted shares 206,473,374 194,830,197
Diluted earnings per share ($) 0.056 0.042
6 ADJUSTED EBITDA
The Directors of the Group have presented the performance measure adjusted
EBITDA as they monitor this performance measure at a consolidated level and
they believe this measure is relevant to an understanding of the Group's
financial performance. Adjusted EBITDA is calculated by adjusting profit from
continuing operations to exclude the impact of taxation, net finance costs,
share-based payment expenses, depreciation, amortisation of purchased
intellectual property, brands and customer relationships, acquisitions costs,
exceptional costs relating to the conflict in Ukraine and IPO transaction
costs. Adjusted EBITDA is not a defined performance measure in IFRS. The
Group's definition of adjusted EBITDA may not be comparable with similarly
titled performance measures and disclosures by other entities.
Year ended Year ended
31 December 2022 31 December 2021
Unaudited Audited
$'000 $'000
Profit for the year 11,513 8,243
Income tax expense 4,417 4,281
Finance costs 73 8
Finance income (80) -
Share-based payment expenses 1,726 2,452
Amortisation of purchased intellectual property, brands and customer 3,999 1,662
relationships
Depreciation of property, plant and equipment 747 117
Impairment of intangible assets 11,075
IPO related costs - 4,588
Ukraine related costs 1,678
Acquisition costs 329 888
Other operating income (11,122) -
Adjusted EBITDA 24,355 22,239
7 INTANGIBLE ASSETS Purchased intellectual property Software development costs
Goodwill Brands Customer relationships Total
$'000 $'000 $'000 $'000 $'000 $'000
Cost:
As at 1 January 2021 - - - 6,170 17,126 23,296
Additions - internally generated - - - - 15,085 15,085
Additions - separately acquired - - - 10,832 - 10,832
Additions - business combinations 13,202 1,815 4,261 2,356 - 21,634
Transfers - - - 1,962 (1,962) -
Disposals - - - - (90) (90)
As at 31 December 2021 13,202 1,815 4,261 21,320 30,159 70,757
Additions - internally generated - - - - 35,789 35,789
Additions - separately acquired - - - 8,395 - 8,395
Transfers - - - 251 (251) -
As at 31 December 2022 13,202 1,815 4,261 29,966 65,697 114,941
Amortisation and impairment:
As at 1 January 2021 - - - 1,086 7,070 8,156
Amortisation charge for the year - 10 51 1,601 3,500 5,162
Impairment charge - - - - 283 283
As at 31 December 2021 - 10 51 2,687 10,853 13,601
Amortisation charge for the year - 121 609 3,269 5,787 9,786
Impairment charge for the year 9,456 675 - 944 95 11,170
As at 31 December 2022 9,456 806 660 6,900 16,735 34,557
Carrying amount:
As at 31 December 2022 3,746 1,009 3,601 23,066 48,962 80,384
As at 31 December 2021 13,202 1,805 4,210 18,633 19,306 57,156
8 RELATED PARTY TRANSACTIONS
An analysis of key management personnel remuneration is set out below:
Key management personnel remuneration Year ended Year ended
31 December 2022 31 December 2021
Unaudited Audited
$'000 $'000
Aggregate emoluments 2,217 3,037
Equity-settled share-based payments 88 2,159
2,305 5,196
Transactions with other related parties
The wife of the Company's CEO is a member and manager of DevGAMM LLC. During
the period, DevGAMM LLC paid dividends totalling $148,000 to this related
party.
The Company also acquired Bossa's IP Catalogue for consideration of $3m.
Henrique Olifiers, Non-executive Chairman of the Company, is the Founder and
CEO of Bossa. As a result of this relationship, the IP Catalogue acquisition
represents a related party transaction in accordance with the AIM Rules for
Companies. The Directors of tinyBuild, excluding Henrique Olifiers, consider,
having consulted with Berenberg, tinyBuild's nominated adviser, that the terms
of the transaction are fair and reasonable in so far as shareholders of
tinyBuild are concerned.
There were no other related party transactions during the period which require
disclosure.
9 POST REPORTING DATE EVENTS
In March 2023, after taking paternity leave in 2022, Luke Burtis, Chief
Operating Officer (COO) and Board Member, announced his resignation with
immediate effect to spend more time with his family. As the Company continues
to move towards the more decentralised structure set out at the Capital
Markets Day in June 2022, the responsibilities of the COO role have been
distributed among a wider group of decision-makers, giving individuals and
teams more autonomy and accountability for their areas of responsibility.
Therefore, the Company does not currently intend to appoint a replacement.
In March 2023, tinyBuild acquired NotGames (Not for Broadcast) for initial
consideration of $1.5m. The agreement contains performance based earn-outs
over the next three calendar years, subject to operational targets being met.
NotGames is the developer studio of Not For Broadcast, a critically acclaimed
full motion propaganda simulator.
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